Innovation in financial technology has been increasing and a primary focus of fintech developers has been expanding markets and tech apps for virtual banking platforms. Virtual banks are financial institutions that maintain their entire presence online and handle all transactions over the internet and through ATMs. In this article, Rory Brown, Managing Partner of Nicklaus Brown & Co., discusses some of the recent developments in the industry around the world.
Mexican and Latin American markets are historically underbanked, with more than 90% of consumer transactions still limited to cash. The Mexican government has taken steps to use fintech to offer citizens more secure and efficient banking over the internet, launching a digital payment system through the Mexican central bank in 2019. This system allows customers to make payments digitally through an app and QR codes for many goods and services. Many fintech companies are showing interest in the underserved Mexican financial markets, and continuing legislation opening up regulated virtual banking markets is expected soon.
Canadian law is facilitating the launch of many new virtual banks as a result of banking regulations that do not limit interchange and payment systems in the same ways, both in terms of time delays and fee limitations. Canadian fintech firms are, therefore, able to offer broader services with lower rates and fees. Most Canadian virtual banks are able to offer cashback on some payments, no-fee ATM use, and minimal monthly service fees for customers. Canadian fintech and virtual banking are a viable alternative to traditional banking institutions, especially among younger customers who are much more interested in attractive rates and point-of-sale ease than traditional branch banking.
Honk Kong has been progressive with regard to virtual bank licensing, providing access to full banking services and government insurance of deposits without requiring brick and mortar branches. The government does require relatively high capital for a virtual banking license. The fintech companies that have been able to obtain virtual banking licenses are among the largest banks and insurance companies in the world. Even in a climate of political uncertainty, Hong Kong continues to maintain its position as a financial powerhouse globally. That trend is expected to continue in the virtual banking sector.
Xinja recently began operations in Australia, promising enhanced customer service and higher interest rates than traditionally found in the Australian market. The virtual bank was licensed in mid-2019 and began working with 13,000 customers and has a growth plan to add thousands more. Xinja is the first Australian bank to offer fully digital banking services and is expected to move into the home financing market. Expanded licensing opportunities should lead to additional virtual banks entering the domestic Australian market.
About Rory Brown
Mr. Rory Brown has focused on financial technology and investment management for 30+ years. Rory Brown Co-Founded one of the world’s first Internet Banks and writes extensively about the industry.